2.11 Following Ministerial approval for the project in August 1996, MOD needed a skilled team that understood the technical environment and how the Department's requirement could be met. It appointed a multi-disciplinary advisory team to assist its in-house team in defining the project and achieve a successful outcome. After its evaluation, based on a value-for-money test, of 11 shortlisted applicants from a total of 35 responses, MOD chose a team led by PricewaterhouseCoopers (PwC). MOD appointed Herbert Smith as its legal advisers through a separate competition. Both sets of expertise were not available in-house.
2.12 The actual cost of PwC's advice and of the legal advisers up to contract signature are shown at Figure 6. MOD kept expenditure to the budgets agreed with PwC, the lead adviser for the deal which provided both financial advice and procured and managed the technical team. The membership of that team and their area of expertise is shown at note 2 to Figure 6.
2.13 The contract with PwC for the multidisciplinary advisory team was subject to a price cap, a detailed scope of work and performance incentives. MOD divided the project into various phases, and agreed a maximum price for each phase, which conformed with points at which MOD approvals were required or when value for money could be clearly checked. MOD reimbursed costs up to the phase cap, on the basis of pre-agreed hourly rates and actual verified hours worked, but subject to a 10 per cent retention until the delivery of approved deliverables for each phase. PwC considers these arrangements were cost-effective for MOD, particularly as it and the advisers it was managing could not pass on cost overruns to the MOD.
6 |
| Advisers' costs totalled £8.78 million | ||
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| Adviser | Expenditure £m1 | |
|
| PricewaterhouseCoopers2 | 6.82 | |
|
| Herbert Smith | 1.96 | |
|
| Total | 8.78 | |
|
| NOTES 1. All figures are VAT exclusive. 2. The expenditure figures include payments to the following advisers subcontracted to PricewaterhouseCoopers: | ||
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|
| DEGW | Architects and space planning |
|
|
| Waterman Partnerships Bernard Williams Associates | Structural Engineers Cost consultants and facility management specialists |
|
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| DTZ | Town planners Mechanical, electrical engineers, IT infrastructure |
|
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| Bovis Program Management | Construction and programming |
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| Source: Ministry of Defence |
| |
2.14 MOD did not agree a price cap for legal advice as it considered it could not forecast the scope of the work with sufficient accuracy, because of the size and complexity of the project, to agree a maximum price. Budgets were agreed based on fixed hourly rates, however, and MOD monitored resources used. Where the production of the Invitation to Negotiate was more protracted than envisaged, MOD negotiated a price reduction with Herbert Smith.